Intel’s efforts to revitalize its operations gained momentum with a significant agreement to produce two semiconductors for AWS, along with a $3 billion government contract aimed at enhancing chip production for the U.S. military.
On Monday, Intel announced that it would establish its foundry business—a branch focused on chip manufacturing—as an independent subsidiary. This move further delineates it from Intel’s chip design operations, with the hope that a clearer separation will encourage other chipmakers to collaborate with its foundry.
The positive response to the AWS and government contracts drove Intel’s stock price up, marking the first substantial gain since the company unveiled drastic measures last month to support its most extensive restructuring in four decades. As part of this overhaul, Intel plans to reduce its workforce by 15%, which translates to 15,000 jobs, and cut $10 billion in capital spending.
Once the premier chipmaker in the U.S., Intel has struggled to keep pace as the semiconductor landscape has shifted away from traditional data center chips to GPUs that facilitate AI models and applications. As a result, the company has lost significant market share to Nvidia, a leader in AI chips, as well as AMD.
Under the AWS agreement, Intel will produce an AI fabric chip for the cloud provider using its latest manufacturing technology called 18A. Additionally, Intel will create a customized Xeon 6 chip for AWS as a continuation of an existing partnership to supply data center processors tailored to AWS’s specifications.
Industry analysts view Intel’s collaboration with AWS as a positive development, given that AWS and its competitors, such as Microsoft Azure and Google Cloud, are major consumers of chips for AI applications. Meta, the parent company of Facebook, is also a significant player, with a growing demand for AI processors.
Intel’s deepened partnership with AWS, along with its collaborative efforts with Microsoft Azure to develop custom Xeon chips for specific Azure services, indicates some degree of stability in the foundry sector, according to IDC analyst Mario Morales. He remarked, “This demonstrates Intel’s newfound flexibility and willingness to leverage its intellectual property to meet customer demands, including the development of tailored silicon—a shift Intel had previously been reluctant to make, especially regarding cloud service providers.”
However, uncertainties remain regarding Intel’s recent announcements. The company did not disclose the anticipated revenue from the AWS deal, only mentioning it as a “multi-year, multi-billion-dollar framework covering product and wafers.” Likewise, the $3 billion awarded by the Biden administration for advanced chip production for the Defense Department represents a long-term endeavor that will yield revenue gradually rather than immediately.
Morales noted that this announcement helps clarify the long-term nature of the project. The recent funding is part of the federal government’s $39 billion CHIPS Act aimed at bolstering domestic semiconductor manufacturing. Previously, Intel received $8.5 billion to support the development of U.S. foundry projects.
It remains uncertain whether Intel’s transition of its manufacturing division into an independent subsidiary will attract partnerships with chipmakers like AMD, Broadcom, Marvell, and Qualcomm. The company continues to depend on its foundries for developing competitive chips, such as next year’s Falcon Shores for high-performance computing, underscoring the significance of these upcoming products for Intel’s survival. Morales suggests that given the importance of maintaining control over its manufacturing sector, Intel is unlikely to relinquish complete oversight.
Despite its challenges, Patrick Moorhead, chief analyst for Moor Insights and Strategy, expressed optimism about Intel’s position, believing the latest agreements put the company in a stronger stance. He predicts that Intel’s advanced 18A manufacturing process could lead to more partnerships with cloud providers and the creation of more powerful, energy-efficient chips. “I anticipate we’ll see signs of recovery in the latter half of 2025, with Intel fully hitting its stride by 2026,” he said.
In a recent update for employees, Intel CEO Pat Gelsinger revealed that construction projects in Poland and Germany would be paused for about two years due to lower-than-anticipated market demand. However, plans for U.S. manufacturing operations will proceed as scheduled, with ongoing construction in Arizona, New Mexico, Ohio, and Oregon.
Gelsinger also stated that the company is making significant progress in its workforce reduction, with more than half of the 15,000 job cuts already implemented, and is on track to reduce or exit approximately two-thirds of its global real estate holdings by the year’s end.
Antone Gonsalves serves as an editor at large for TechTarget Editorial, covering critical industry trends for enterprise technology buyers. With 25 years of experience in tech journalism, he is based in San Francisco. For news tips, feel free to contact him via email.